Stock Market Week: Why chartists expect Footsie at 4,000 by the end of August

Could Footsie nudge 4,000 points by the end of next month? A fascinating thought in view of the tremors of last week.

Chris Chaitow, chartist at Robert Fleming Securities, is the man putting his head on the block by suggesting such a strong display.

Chartists, of course, plot the past to predict the future. And it is a study of Footsie since it was launched 12 years ago that has allowed Mr Chaitow to arrive at his conclusion.

Last month Footsie fell for six consecutive days. It was only the tenth time such a run had occurred. The Fleming man says after most of the 10 retreats shares were up a month later. This time round they have performed true to form. But, more importantly, two months after each of the six- day slides the stock market was higher and the average gain 100 days afterwards was nearly 10 per cent.

Says Mr Chaitow: "Of course, the natural trend of equity markets is up anyway but these results are two-to-three times the moves one would expect under normal conditions."

In chartist speak there is, however, one unhelpful influence. The June six-day fall took Footsie below 3,700 - a crucial support level.

Mr Chaitow goes with the bull case and, with Footsie going above 3,700 since the slide, "the potential if the signal works is that it could be very close to 4,000 by the end of August".

Chartists do not enjoy universal support. Many look upon them as odd- ball characters, even cranks, surrounded and mesmerised by charts. There is a deep scepticism about the value of their work. A jibe by Jim Slater, in the days before he became a minus-millionaire, about men in ragged raincoats with big bank overdrafts, still lingers hurtfully.

Even so, charting is an area which few large investment houses are prepared to ignore. Most have chartists on their books with, for example, Richard Lake at SBC Warburg and Robin Griffiths at James Caple enjoying, like Mr. Chaitow, wide followings.

Fund managers have also become more optimistic, according to a survey by Merrill Lynch. For the first half of the year bears were in the ascendancy but in recent months fund managers have said they intend to increase their UK exposure.

Investment house year-end Footsie forecasts are generally unchanged. Societe Generale Strauss Turnbull is on 3,900 to 4,100; James Capel goes for 4,000; so does Charterhouse Tilney. NatWest Securities looks for 3,700 and Goldman Sachs 3,400.

While the debate about the market's direction continues, share trading gets even more sophisticated. Crest, a paperless share settlement system, will be launched today. Initially it will embrace only 14 companies, with English China Clays the largest.

The 14 have been selected to give Crest a spread of experience. First settlements on the electronic system will be on 19 August. Other stocks will be quickly pulled in and the pounds 25m system, successor to the ill-fated Taurus which was abandoned in 1993 after costing pounds 400m, should be handling 95 per cent of share transactions by the end of April.

After then, it would not be surprising if there is eventually a concerted effort to eliminate paper share certificates, now rather dowdy documents and far removed from the colourful, even exotic creations which used to circulate.

The advent of Crest could be regarded as yet further discouragement for private investors. Whether that will turn out to be the case remains to be seen.

Private investors have three choices. Carry on as normal and hope companies continue to issue certificates; operate through a stockbrokers' nominee account, which means they will be lumped in with others and lose almost all shareholders' traditional rights, or become a sponsored member of Crest.

Cost of membership depends on the stockbroker, who will be charged pounds 20 by Crest for each member. So the broker should not, in theory, need to heap much on top of the initial membership fee. Some brokers say their sponsorship will be free.

Such a set-up should not be too discriminatory against the private investor. However, the market's obvious desire at least to keep pace with markets around the world does mean life is becoming more difficult for the small man while the power of the institutions continues to increase.

Yet the private investor remains the lifeblood of small stockbrokers. They still represent a substantial number of the market's bargains although in valuation terms they are dwarfed by institutional power.

With settlement periods being reduced - instant settlement eventually - the old- fashioned share certificate might not, therefore, last much longer, except when it is tucked away in a drawer by an investor who rarely, if ever, trades and is content to concentrate on dividend payments.

British Telecom, with first quarter figures, and Bulmer, the cider group, are among companies which have so far signalled profit announcements this week.

Bulmer, the Woodpecker and Strongbow group which is still the country's biggest cider maker despite the rapid growth of Matthew Clark, is not expected to produce outstanding figures on Wednesday.

Colin Davies at Goldman Sachs is on pounds 27.5m, which would represent a pounds 2.5m advance. In March, Bulmer consolidated its position as number one when it splashed out pounds 23.3m for Inch's cider, the biggest independent with a 7 per cent market share.

BT has first quarter figures, also on Wednesday. An announcement tomorrow involving BAA, the airports group, could, however, have a much bigger share impact.

The Civil Aviation Authority is expected to produce a new pricing package for BAA's south-eastern airports. With regulators getting more aggressive there is always the fear BAA could face much tighter controls than is generally expected. But Lehman Brothers is relaxed, expecting CAA moves to have only a modest impact on BAA's profits, which analyst Guy Kekwick estimates at pounds 455m this year.

Suggested Topics
PROMOTED VIDEO
Arts and Entertainment
On set of the Secret Cinema's Back to the Future event
filmBut why were Back to the Future screenings cancelled?
News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
No Devotion's Geoff Rickly and Stuart Richardson
musicReview: No Devotion, O2 Academy Islington, London
News
i100
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride